COLLECTED WISDOM™ on 401k Hardship Withdrawals
Hardship distributions are a valuable component of many 401k retirement plans. They encourage participation in the plan and provide a sense of security to participants as they seek a balance between retirement savings and current financial needs. But plan sponsors need to know the rules and administer hardship withdrawals carefully.
Hardship Withdrawals: An Overview - Summary: A good basic overview on the issue.
Located on: 401khelpcenter.com.
Participant Hardship Request Form - Summary: This is a sample participant hardship request form.
Source: Plan Design Consultants 
, January 2012.
Growth in Hardship Withdrawals Slows - Summary: Among plan participants who took some type of savings action during Q3 2011, 72% took a positive action (started or increased contributions), Bank of America Merrill Lynch reported.
Source: Planadviser.com, November 2011.
Best Practices for Reducing Loans, Hardship Withdrawals, and Impulsive Investment Decisions - Summary: Negative behaviors such as using the 401k plan as an emergency fund instead of a long-term retirement savings account and taking excessive loans and hardship withdrawals is a symptom of a bigger problem among the employee population. The same is true for impulsive investment decisions that could ultimately delay employees' retirement. A combination of plan design and financial education works well to improve employees' financial wellness by casting a wider net in order to help employees help themselves without feeling pushed.
Source: 401khelpcenter.com, October 2011.
Examine Loans and Withdrawals in the Right Context - Summary: Data widely reported in the industry media on loans and withdrawals from 401k plans have generated quite a buzz among plan sponsors. Some reports in recent months characterized participant loan and withdrawal activity as being at "record levels." However, a Vanguard analysis of loans as well as in-service and hardship withdrawals tells a different story.
Source: Vanguard, December 2010.
Hardship Distributions: Lost Retirement Savings or Safety Valve for Employees? - Summary: Hardship distribution provisions in 401k plans used to be one of those matters on which plan sponsors didn't spend a whole lot of time. But because of the economy, that's not the case anymore. As a result, two points of view about hardship distributions have evolved.
Source: Employee Benefit News (free registration may be required), February 2010.
Loans Vs. Hardship Withdrawals: Penalties And Taxes - Summary: There are three ways that cash can be taken out from a 401k account: A regular 401k loan, hardship or non-financial hardship withdrawal. Each is explained in this article with the applicable provisions.
Source: Istockanalyst.com, November 2009.
FAQs Regarding Hardship Distributions - Summary: This FAQ is provided by the IRS as a general guide and overview regarding hardship distributions from 401k plans.
Source: IRS, April 2009.
Hard Times Mean More 401k Hardship Distributions - Summary: Hardship distribution provisions in 401k used to be one of those retirement plan matters on which plan sponsors didn’t spend a whole lot of time. Lately, however, that's not the case.
Source: Retirement Plan Blog, April 2009.
Hardship Withdrawals and the Mortgage Crisis - Summary: Hardship withdrawals from Vanguard DC plans rose in 2006 and 2007, although the absolute level of withdrawals is still quite low. The increase may be correlated with either the emerging home mortgage crisis or broader economic stress among financially vulnerable plan participants.
Source: Vanguard Center of Retirement Research , April 2008.
Helping Employees Understand the Pros, Cons of Hardship Withdrawals - Summary: Some companies offer hardship withdrawals in lieu of loans against the retirement plan. Typically, the withdrawal is processed after the employee requests it with no questions asked. So, how can education be used as a gatekeeper and to help employees become aware of the pitfalls and their alternatives?
Source: Financial Finesse , December 2005.
Hardship Withdrawals Give Access to 401k Savings, But at a Cost - Summary: If you're in a financial pinch, you might be able to tap your 401k for a bailout -- but it could really cost you.
Located on: 401khelpcenter.com, December 2002.
401khelpcenter.com, LLC is not the author of the material referenced in this digest unless specifically noted. The material referenced was created, published, maintained, or otherwise posted by institutions or organizations independent of 401khelpcenter.com, LLC. 401khelpcenter.com, LLC does not endorse, approve, certify, or control this material and does not guarantee or assume responsibility for the accuracy, completeness, efficacy, or timeliness of the material. Use of any information obtained from this material is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by 401khelpcenter.com, LLC.
